COMFORTABLE, working American has little cause to complain- about the quality of health care he receives. The United States is brimful with highly paid doctors, one for every 400 citizens. These doctors have at hand the world's finest gadgetry, in liberal quantities: the rich western part of Germany has 0.7 open-heart surgical units per million people, and Canada 1.2, but America boasts 3.3. Best of all, for that working American, health care is nearly always a perk that comes with the job. That renders almost bearable the mass of form-filling that sprouts with each verruca.
Physician paradise, though, is fast becoming corporate hell. For 50 years a benign federal government has encouraged companies to provide health cover for their workers by exempting health benefits from income tax. Employers now pay for 85% of the 173m Americans covered by private health insurance. The cost of health, meanwhile, has ballooned. Annual spending per head on health care has risen, in constant dollars, from $950 in 1970 to $2,350 in 1989. For most businesses, health care is the second-biggest item of expenditure behind salaries. The cost, on average, is now equivalent to two-fifths of companies' post-tax profits.
Yet it is the tax break which, more than anything, contributes to America's climbing health costs. Since an employer pays for most of the benefits of his staff, they have little incentive to keep medical costs down. By the same token, hospitals and doctors, charging a fee for each service rendered (and fearing malpractice suits), have a duty to themselves not to skimp on treatment.
Both business and government have made attempts to control medical costs by, for instance, rationing the services provided to consumers. But often costs saved in one quarter have merely flowed to another. Health spending continues to grow by 5% a year in real terms. In 1980 health spending absorbed 9.3% of GDP; in 1989 it absorbed nearly 12%, or $604 billion. Canada spends only 8.7% of itS GDP on health, Britain 5.8%.
Employees are now learning that they are not immune to business's troubles. Last year four-fifths of all of America's labour disputes centred on medical benefits that companies were trying to cut. Thousands of (mostly small) businesses cannot, or choose not to, provide health cover for their workers-particularly in industries that insurers deem to be high-risk. These workers are usually too poor to buy their own insurance. As a result, the employed account for most of the 34m Americans (including dependants) who languish without medical insurance. A large but unknown number of other employees, particularly those with a history of high medical costs, want to change jobs but cannot, for fear of losing health insurance.
As with business, so with federal and state governments. Largely through the Medicare programme for the elderly and Medicaid for the poor, federal and state governments now pay for 42 cents of every dollar spent on health care (they also lose about $58 billion of revenues from those tax perks). indeed, the American government spends almost as much of GDP on health as the British government does (see chart on next page). This might have been expected to rein in costs. Yet spending on health as a share of all federal spending has risen from 10% in 1975 to nearly 15% today. Medicare costs, at an annual $100 billion, are soaring, largely because more old people are being kept alive longer with ever costlier technology. The Medicaid programme covers only two-fifths of those officially described as poor. Yet the Bush administration is bewildered that Medicaid costs are wildly exceeding predictions.
A Democratic stretcher-case or two
All of which has led some Democratic Party barons, headed by George Mitchell, the Senate majority leader, to think that they might have found an issue with which to shame the administration. Two kinds of reform are proposed.
The first is for America to adopt the Canadian system of health care. in this, though hospitals and doctors work largely in the private sector, universal access to medical care is paid for by the government out of taxation. This idea is popular among an unusual alliance of labour leaders and big companies-the ones that would like to be relieved of expensive commitments to past and present employees.
Last week four Democratic senators launched a bill to reform health care in a different manner. Under this bill businesses would have the choice of either insuring all employees or contributing to a payroll tax, from which government would provide coverage. This plan, supported by Mr Mitchell, has the advantage that it would not radically change the current mix of health-care finance-non-profit insurers, private insurers and health maintenance organisations (HMOS), which, for an annual fee, dispense health care to their clients through own-brand doctors and hospitals.
Yet both plans are flawed. Canada's system suffers from queues, shortages and ropey equipment. Canada's long border with America's swifter medical services acts as a safety valve to a system under pressure. Moreover, the Canadian government's monopoly over health spending has failed to curb costs. in the 20 years to 1987, Canada's real spending per person rose by 4.6% a year, compared with 4.4% in America.
Forcing business to foot the bill is even less feasible. The Mitchell plan envisages a tangle of subsidies for small and barely profitable businesses. The annual cost of these and other subsidies could be $60 billion or more. Given the current state of the budget, the money could not be found.
Neither proposal promises to restrain spending. One that does is being advanced by the Heritage Foundation, a conservative think-tank. This simply proposes that the link between tax breaks and employer-provided cover be abolished. In its place, tax credits would be given to families, varying according to income and health expenditure. in return families would, by law, be required to buy a minimum degree of health cover. Such a system would help to control costs by putting spending choices in the user's hands, allowing him to choose among current insurers and providers. It would also allow him to carry health cover from one place of work to the next.
If they were imaginative enough to see it, such a proposal-as well as being by far the simplest of the three-would have something to appeal to both Democrats and Republicans. By taking nearly $60 billion of tax breaks from the well-paid employees who now benefit most from them, and then spreading them as credits to the less well-paid, the Democrats could back a progressive tax reform. And giving more power to the consumer would dance well to the tune of 'empowerment' that the White House has been whistling of late.
Many politicians-on the House Ways and Means Committee, the National Governors' Association and in the Democratic leadership, among others-have promised that this year health reform will be the big issue. Even the administration, in the recent form of Richard Darman, director of the Office of Management and Budget, has talked about it. But a summer gleam in Washington's eyes is liable to glaze over long before the leaves turn red.
